Tsakos Energy Navigation Ltd (TEN) 2014 Q3 法說會逐字稿

Thank you for standing by, ladies and gentlemen, and welcome to the Tsakos Energy Navigation conference call on the third quarter 2014 financial results.

We have with us Mr. Takis Arapoglou, Chairman of the Board; Mr. Nikolas Tsakos, President and CEO; Mr. Paul Durham, Chief Financial Officer; and Mr. George Saroglou, Chief Operating Officer of the company.

At this time, all participants are in a listen-only mode. There'll be a presentation followed by a question and answer session. (Operator instructions.) I must advise you the conference is being recorded today,

Friday, November the 21st, 2014.

And I now pass the floor to Mr. Nicolas Bornozis, President of Capital Link, Investor Relation Advisor of Tsakos Energy Navigation. Please go ahead, sir.

Thank you very much, and good morning to all of our participants. This is Nicolas Bornozis of Capital Link, Investor Relations advisor to Tsakos Energy Navigation.

The Company released its financial results for the third quarter of 2014 this morning. The press release has been distributed publicly. In case you do not have a copy of it, please call us at 212-661-7566 or email us at Ten at Capitallink.com, and we will e-mail you a copy right away.

Please note that parallel to today's conference call there is also a live audio and slide webcast which can be accessed on the Company's website on the front page at www.tenn.gr. The conference call will follow the presentation slides, so, please, we urge to access our presentation on the webcast.

Please note that the slides of the webcast will be available as an archive on the Company's website after the conference call. Also, please note that the slides of the webcast presentation are user-controlled, which means that, by clicking on the proper button, you can move to the next or to the previous slide on your own.

And at this time, I would like to read the Safe Harbor statement. The conference call and slide presentation of the webcast contains certain forward-looking statements within the meaning of the Safe Harbor provision of the Private Securities Litigation Reform Act of 1995.

Investors are cautioned that such forward-looking statements involve risks and uncertainties which may affect TEN's business prospects and results of operations. Such risks are more fully disclosed in TEN's filings with the Securities and Exchange Commission.

And before turning over the podium and the call to Mr. Arapoglou, I would like to take a moment to congratulate Nikolas Tsakos for his election to the Chairmanship of Intertanko.

On November 12th, the Intertanko Council of Members met in Dubai and elected Nikolas Tsakos as Chairman of the association, succeeding Graham Westgarth, who stepped down after five years in that position.

Intertanko is the Independent Tanker Owners Association. It has about 212 members with a combined fleet of about 31,000 tankers, or 270 million deadweight tons. The associate membership stands at about 300 companies related to the tanker industry. And Intertanko stands for safe transport, cleaner seas, and free competition.

Niko, congratulations. I think the election of Mr. Tsakos to the Chairmanship is a major recognition for him personally and also for TEN. And now we can say that Nikolas is not only the captain of TEN but also the captain of the industry. Congratulations; it's a major, I think, distinction and honor.

Thank you. Thank you, Nick.

And with that, I will pass the call to Mr. Arapoglou, the Chairman of the Board of Tsakos Energy Navigation. Mr. Arapoglou, please go ahead, sir.

Thank you, Niko. Good morning, everyone. Thank you all for dialing in today for the third quarter results.

You have by now received our press release, and I think the numbers speak for themselves. Our recent performance comes to I think fully justify our business model, especially in view of recent market developments. And I'm sure Mr. Nikolas Tsakos and George Saroglou will speak to this.

I strongly believe that this quarter is a real inflection point at which TEN is starting to fire in all cylinders. We continue to believe that investors in our stock are taking a very static approach to the profitability dynamics of TEN. And as a result, we believe the stock continues to be massively undervalued.

Today's results, if coupled with the high quality revenue of our long term chartered new-building pipeline kicking in in 2016, can easily justify substantially higher valuations than the ones we have today.

That's for me for now. I thank you all. I wish you all a nice weekend and happy Thanksgiving. And I turn the platform to Mr. Nikos Tsakos.

Thank you, Takis. And again, we are very glad to announce significant profitability. But, in our 21 years of trading as a public company, we have 18 years of significant profitability and three down years due to the difficult markets.

But again, we used those three years of the difficult market, as George will point out, to increase the size of our fleet and to make the Company be ready for the next turning point. But I agree with Takis. We might be very close to it right now.

With this in mind, I would ask George Saroglou, our COO, to give us a quick overview of the last nine months and the last quarter. And we will be available, Paul Durham, our CFO, and myself, to answer any further questions. Thank you.

Thank you, Nikos. It's a great pleasure to speak with all of you today and provide you with the details of our operations and of another quarter and nine months.

For those of you who are connected to the Internet and our website, there is an online slide presentation, which format we will follow during the call. Let's turn to slide number three.

We have a pro forma fleet of 63 vessels, 47 of which in the shuttle tankers carry crude oil. And if you want to break out the vessels that carry crude, it's we have one VLCC; 12 Suezmaxes after the company took delivery of two modern Suezmax tankers in mid June and in early July, with one vessel trading in a very strong spot market with rates currently over $86,000 per day and a sister vessel on a profitable time charter to a major oil company; 17 Aframax tankers, eight in the water and nine new-buildings under construction for Statoil; three DP2 Suezmax shuttle tankers, two already in the water fixed on long time charters, and one on order recently announced for delivery in the third quarter of 2017 which, as we said, is also fixed on a long term charter.

And we have 14 out of the 28 product tankers in the fleet engaged at the moment in crude trade operation, resulting in 35 vessels out of the 50 vessel operating fleet trading crude oil today.

31 vessels have their earnings tied to a surging spot market. We also have two LNG vessels, including one in the water and one on order.

Thanks to our balanced time charter philosophy, we continue to operate the fleet at a very high utilization rate, almost 98% for the third quarter and the nine months of the year, when the average utilization of the tanker fleet in 2014 is expected to be a little over 87%.

We have to highlight also the additional long term contracted business with oil majors, which adds to the company's current portfolio of new-building assets. We announced two LR1 product tankers during the quarter and one DP2 Suezmax shuttle tanker.

And if we add the nine Statoil Aframaxes all under long term contracts as well, this creates a series of assets with potential gross revenue generation, if all charter options are exercised, of approximately $1.25 billion with average charter duration of approximately 11 years, making most of these vessels ideal candidates for an MLP that the company is currently considering.

We chartered two Suezmaxes on profit sharing arrangements, two Panamax tankers, and one MR at fixed rates which were higher than the expiring rates.

The next slide has the financial highlights of our press release; strong improvement in every metric leading to a profitable quarter and nine months; $20 million net income for the nine month period versus a loss of $1.9 million for the nine months of 2013; a 67% increase in the operating income at $46.8 million; $124.1 million EBITDA for the nine month period, a 20% increase over the nine month period of 2013; very strong cash reserves of $213 million; 31 vessels benefitting from a very strong spot tanker market triggered by the reduction in the price of oil; and we have continued this impeccable debt service record since a few years back when we had the crisis of 2008, while we maintained firepower to grow responsibly.

The next slide is basically a snapshot of the three sectors the company operates. We operate in crude, in products, and DP2 and LNG. The fleet is very sophisticated vessels built to fit the transportation requirements of the company's clients.

The details of the fleet in slide number six, as you see here we have -- most of the fleet has been built primarily with new-buildings, especially after 1997, primarily in South Korea and Japan.

We have currently on the new-building program nine Aframaxes for delivery between 2016 and 2017, two LR1 Panamax tankers for delivery in 2017, and one -- sorry, in 2016, and one Suezmax DP2 shuttle tanker for delivery in the first quarter of 2017, and one tri-fuel LNG for delivery during the first quarter of 2016.

The fleet is very modern, with the average age of the operating fleet today at 7.4 years, much younger than the average age of the global fleet.

The clients of the company on the next slide, these are the clients with whom we do repeat business over the years thanks to the quality of service, the fleet modernity, and the safety record of the enterprise fleet. In the same table, beside the names we also list the top clients and the revenue of the company during 2013.

In the net income breakdown in Q3, as you can see we have a very low cost base because we built the majority of the fleet before the rise of the new-building prices and the current state of the market, which we have seen the surge in the market which happened much earlier than the surge that we experienced last year. And it has positively affected the third quarter.

And the fourth quarter, as we move into the seasonally strong fourth quarter, you see where that rate environment is right now. We have some color on the market in the slides that will follow.

The employment slides, we continue to have a balanced employment strategy with a mix of spot charters, COAs, and pooling arrangements and period charters, with fixed rates and minimum rates with profit sharing arrangements.

We have 19 vessels on time charter with fixed employment, 11 vessels in profit sharing, and 20 vessels trading in a combination of spot, COAs, and pools.

Another way of reading the employment details of the fleet is that 33 vessels have secured employment from less than a year to 14 years, and 31 vessels have their earnings tied in full or up to 50% of the minimum base rate to a spot market that continues to surge.

Let's see what we see in the market -- what we've seen in the market and what we see going forward. We have seen oil demand in the third quarter increasing by approximately 1.5 million barrels per day over the second quarter of the year. And that, coupled with more long haul movements of West African barrels to Asia and the fall in the price of oil after Brent hit $115.00 in mid June, has gradually led to increased stockpiling. And this pushed average tanker freight rates higher, making the third quarter of 2014 a strong and profitable quarter.

The market firmed further as we entered the seasonally strong fourth quarter, much earlier than the market firming we experienced last year. With the group's tanker order book well balanced in equilibrium, refineries back from their maintenance, and demand for oil forecasted to grow by another 500,000 barrels per day in the fourth quarter, and maybe more as a result of even lower crude prices and the winter season starting in the Northern Hemisphere, demand for tankers and average freight rates in the fourth quarter should move higher, making 2014 the best year for tanker earnings since the crisis started.

The lower crude prices, the price of Brent is currently down 32% from the peak in June, results in lower ship operating costs through the reduction of bunker fuel prices and bunker bills. And that, for as long as it will last, will affect positively the company's bottom line.

The fleet, as we said, the order book is -- the fleet, as we said, is very well balanced. And if we want to put a dollar value on the employment -- the current employment status of the fleet, on slide number 12 we see that, as of today, we have fixed 49% of the available days of 2015 and 30% of the operating days of 2016.

Assuming only the minimum rate, we have secured 878 months of forward employment, or 2.5 years per vessel, and $800 million in minimum gross revenue.

Slide 14 shows the track record in the sale and purchase activity since 2013. As we stated, sale and purchase activities are an integral part of our operation, and the record verifies that, and fleet modernity is a key element of the corporate strategy.

Besides the recent acquisition at attractive price levels of two modern Suezmax sister vessels, the Suezmaxes already operating in the fleet, the company strategically and opportunistically could be seen divesting certain assets that provide capital gains and release cash.

Fleet modernity, while growing responsibly with committed business rather than building on speculation, remain key elements of our strategy.

On the dividend on slide 14, this is the history. The next dividend of $0.05 per common share will be paid on November 25th. We have announced also today an increase of $0.01 per share for the dividend to be paid in the third quarter of 2015.

In total, since 2002 we had paid $9.94 in cash dividends, or approximately $400 million. And this compares with a listing price in our IPO of $7.50 adjusted for the November 2007 two-to-one split.

Although we floated the company in 2002 at $7.50, our share price reached $40.00 in 2007. In comparison to 2007, we have a bigger operating fleet, a new-building program where 12 out of the 13 vessels are tied to long accretive charters, and most of them are fully financed.

But, the current share price doesn't seem to reflect, according to management, the company's financial strength, the embedded companies' growth, and the growth prospects and the current state of the booming freight markets. And this is basically what we say in slide number 15, where we also have the most recent NAV calculation and we list the analysts that cover TEN.

The management vision is to continue growing the company responsibly and, at the same time, have this reality being reflected in the company's share price.

That concludes the operational part of our presentation. Paul will walk you through the financial highlights for the nine months. Paul?

Thank you, George, and hello, everybody. As George has indicated, TEN achieved an operating income of nearly $14 million, 43% higher than the prior quarter three and, for the nine months, 67% higher at nearly $47 million.

TEN's net income in quarter three was $5.2 million versus a prior quarter three loss of $1.4 million. Nine month net income was $20 million. When we add the strong quarter four, TEN will enjoy the first profitable year since 2010.

Quarter three started unusually robust for the period. But, by late August, it reverted to its cyclical norm with rates falling, mainly due to weaker Asian demand.

Nevertheless, quarter three net revenue reached $82.5 million, 12% higher than in the previous quarter three, while for the nine months $247 million was achieved, a 15% increase.

Our Aframaxes operated in a volatile spot market, with average rates in quarter three just above break-even, but 21% better than the prior quarter three average daily rates, and now in quarter four reaching giddy heights.

Average Suezmax rates were also 21% more than the prior quarter three, well above break-even and, like Aframaxes, moving to higher levels in quarter four, partly due to high oil demand arising from low oil prices.

Panamax and Handymax daily earnings were similar to the prior quarter three, and only Handy size rates suffered a noticeable fall. But, this has reversed in quarter four, as MR rates have also risen markedly.

Quarter three generated $41 million EBITDA, a 16% increase over quarter three of 2013. For the nine months, EBITDA increased by 20% to $124 million, all the vessels generating positive EBITDA.

Operating expenses rose between quarters due to the shuttle tanker and new Suezmaxes, but also due to expenses from three dry dockings compared to just one in the prior quarter three.

We believe operating costs are benefitting from the recent strengthening of the US dollar, positively affecting crew and repair costs, while falling oil prices will reduce, apart from bunker costs, the cost of lubricant.

Finance costs were $9.3 million, a 14% fall, mostly due to the decrease in loan margins and expiry of swaps. This was offset to a degree by bunker swap valuations falling due to the drop in oil prices. The lower oil prices were too late to affect quarter three bunker prices, but will have a positive impact on quarter four bunker costs, albeit restrained by the hedges.

In quarter three, we borrowed $39 million relating to the Suezmax Euro, and $46 million in pre-delivery finance for the Aframaxes being built. We paid $27 million back, so debt at 30th of September was $1.4 billion and net debt to capital 51%.

We have arranged finance for the Aframaxes and for the pre-delivery installments of the LNG carrier, and we have already drawn from both. Loan discussions have started on the LR1s and shuttles.

The combination of strong cash balances and pre-delivery finance leaves us in a good position to manage our short term requirements without the need to seek additional equity, especially while the current stock market appears unresponsive to our significant and responsible growth program.

Excluding the newly announced shuttle tanker, we have 12 vessels being built with a total agreed price of $779 million, of which $176 million has been spent to date, with no more expenditure in 2014.

And this concludes my comments, and now I'll hand the call back to Nikolas.

Well, thank you, Paul, for finally good news. And I think we have been talking through the quarters, and mainly through the quarters of 2014, about the light at the end of the tunnel.

I think we've been talking about this since our first quarter, and we said that we were feeling that we are very close to it. If this is the light at the end of the tunnel, we are blinded at this time because the rates are very reminiscent of 2006 and 2007.

I was happy to reject our chartering manger's offer to charter one of our Suezmaxes for a year at $60,000 a day, a time charter. Today I might have to reconsider.

And of course, I think what this proves is that lower oil prices means a firming rate. So, this is a double whammy for shipping. It was very strange for us to sit -- and I think not only us, every other shipping company to sit and see that our share price has dropped significantly every time the price of oil dropped.

I think this is something that we are trying to explain that is wrong. And I think -- hopefully our message is coming across. So, it's a double whammy, high earnings from the one side, lower in the cost of our bunkers, which is our largest cost. And we are looking in a market that still has a couple of very strong seasonal quarters.

As George mentioned, our break-evens are very low because we were able to resist ordering in peak periods. And this gives us a significant upside. Our Chairman mentioned the huge earning capacity of the fleet. And I think today perhaps we are earning as much as we did in 2004 with double the fleet, which means that, if rates continue to where they are now or even less where they are now, we have a huge upside potential.

We believe that we are preparing ourselves for two significantly positive years at least in the markets. The supply and demand curve is finally balanced. In many of the segments of the crude market, we have negative growth. So, we are looking at a much rosier picture than we did at least two years ago.

And we are glad that we have taken the company out of the difficult turmoil times very strong, with a stellar track record, with continuous dividend payments. And we are all ready to reap the benefits of the upside.

The insiders, the Board of Directors and the management, has always been supportive of the company. We increased significantly our stake in the last two quarters. And we are in the same position with our shareholders to take advantage of this long awaited up surge in our business.

We are seeing contango happening again. We're seeing a lot of buying from -- mainly from the Far East. We have seen the low price of oil trigger imports -- significant imports in China, from China and we're seeing a lot of our vessels trading there.

Every dollar drop, for China it means an increase to their bottom line of in excess of $2 billion. So, I think that's a very significant impact, so whereas we are seeing for the first time also demand starting to also reemerge from the West.

So, with this good news, I would like to open the floor for any questions. Thank you very much.

Wells Fargo, Michael Webber.

Hey, good morning, guys. How are you?

Hi, Michael. Very good.

Good. Actually, there's a fair amount to touch on. I wanted to first zero in on the shuttle tankers before moving to the strength in crude. And it's been a while since we could really talk to that.

But first, on the shuttle tanker deal that you guys announced earlier in the month, I just wanted to get a sense of when the option expires on the second asset, what kind of capital outlay you're looking at, and then a general sense of return on the shuttles, and we can kind of move from there.

Yes. Well, as I said, this is the specialized side of the business that we are fond of. And this is a business that is also, I think, very appropriate for going forward with our MLP piece when the market normalizes eventually.

And the second ship will be -- it's not our option. I wish it was because we would have called it already. It's the option of the charterers, and it is within the first quarter of 2015.

Q1 2015, great. And I guess in terms of cost and return, I'm assuming that that rate is pretty sensitive. Otherwise, you would have put it in the release. But, if you can give us a sense of maybe the return you guys are looking at, that'd be helpful from a modeling perspective.

I will write it and send it to you. I think these are returns that is very accretive, is high double digit IRRs at least. And we don't want to advertise this.

Fair enough. Just one more on the shuttles and I'll move to crude. But, just in terms of the way you guys think about allocating capital here, crude is obviously already strengthening and asset values have moved higher. There seems to be a pretty big growth opportunity within the shuttle space. In terms of how you guys kind of rank those sectors in terms of attractiveness now in terms of deploying new capital, is it fair to say that the shuttle tanker space is towards the top right now?

This is correct, yes. I think we are very happy that again we were, I would say, lucky to enter the -- to make the two big acquisitions, as George mentioned, of the Suezmaxes early this year before the market moved.

And those ships, of course, have at least a 25% increase in their value since, which is not, of course, reflected in our share price. But, that has been a very timely purchase.

And of course, they are cash cows. The one vessel I think was chartered at close to $85,000 the last voyage. So, I think we are very happy that we have done these acquisitions. And we have not stopped looking, but I think a specialized business like the shuttle tankers make more sense.

Yes, okay. That makes sense. Along the crude space, and you guys spent some time kind of detailing how strong that is right now and toward the end of your remarks you mentioned that we do see some contango in the curve.

How close do you think we are to actually seeing, I guess, more meaningful on the water storage? Is it something you guys kind of hear kind of bantered about the market in terms of actually physically locking up tonnage to do that? And then I've just got one more on the charter environment, but just around storage, how close do you think we are to seeing that?

I think we will be starting significant contango within next quarter, because right now there is significant demand. And the ships are busy actually delivering and stockpiling cheap crude.

I think what we are trying to do also as an association is in contango, this is -- we cannot influence our members, but not -- to remind them that slow steaming is not a bad idea.

Got you, fair enough. One more for me and I'll turn it over. Just on your comment earlier, you mentioned your chartering manager brought you a one year charter at $60,000 a day on a Suezmax. That's all this -- significantly north of where we've got one year charter rates right now. Is that where you think the market is? And why did we turn -- did you turn it down?

Yes. Well, I was surprised so I just wanted to rehear. It sounded very good.

So, I think, yes, we are looking -- I think if there the times to do this, we will do a piece of business like that because I think it will be a very good benchmark for the market.

Yes, I would agree. Great. All right. Well, I'll turn it over. Thanks for the color, guys.

Thank you.

Stifel, Ben Nolan.

Thanks. Yes, I have a few questions, and maybe I'll start with the -- on the crude side, as you were mentioning. How do you think about or how are you guys approaching the action of OPEC? And maybe could you even take a guess as to what you're expecting them to do? I mean, is that a substantial -- is a production cut from OPEC a substantial risk to the crude macro in the near term, or do you think that the underlying dynamics are sufficiently strong enough such that either there won't be a cut or even a cut would not make that big of a difference?

Well, we don't know what OPEC will do at the end of the day. But, everybody expects the price of oil to remain low for at least until the next six months, if not more. And that really is very good, I think, for stockpiling and for the tanker business, the crude business.

So, we feel that whatever the decision comes out of OPEC, even if it's a cut. It might be the same like it happened in previous times, an announcement of a number and then members not really meeting this new quota.

But the reality, from what we read, is that the oil price is going to remain low. And this is going to be -- this is good for us.

Okay. And then, related to your chartering strategy and, again, the data point on the Suezmax vessel is -- boy, that seems extremely robust. But, in the past, you've talked a lot about -- or the past few quarters you've talked a lot about the inquiry by oil majors and others about doing new-buildings on the back of long term contracts. And you've done that, to some extent. But, could you maybe discuss where that is at the moment? Are you still seeing the same level of appetite? Has it increased at all? What types of ships are being considered in terms of these long term charter new-build programs?

Yes. I mean, looking back in our last, I would say, three last conference calls, I've always been saying that we have more business in our hands than we ever had for a very long period of time, long term business. Now you know why we resisted in chartering out a lot of our ships.

I think we mentioned this in our last call, that we had released a lot of business for long term employment. And the business that we actually chartered from the existing fleet to companies like BP and Chevron, the oil majors, have always been with a minimum and a profit share.

And we are very happy that right now we are enjoying this significant profit sharing, because we are client driven so we cannot just push our clients away. But, I think as long as they are there to share the upside, we are happy to do so.

Right now the appetite is there. And I think you look, one of my quotes were that the major oil companies, they know much more about what will happen in the future than we do. We are just the messenger.

And that's why they were pushing us for the last year to charter ships. And I think the results of today's spot market are obvious, that they could see this supply and demand curve and they could see for tanker. And they could see the demand and their expectations about the oil price.

So, in a sense, we are glad we have resisted. And the business is there. The business is, I would say, as strong or much stronger as before. So, that's a good indication for the medium to long term.

I am not dreaming of a super cycle like the one we had from 2004 to 2008. But, the characteristics of the market, at least on the crude side, supply -- I mean the tonnage and supply, in some segments it is actually negative, the growth. So, we will have a healthy period.

And hopefully the owners will not follow each other to start signing the crude vessels right now. There are no more openings for vessels to be built there until 2017. So, 2015, 2016, and 2017 look to be good years. After that, I hope that we can show some restraint so we can enjoy good economics going forward.

Okay, that's helpful. And then, the last two pretty quick questions I had. The first is on the dividend policy. You kind of indicated a $0.01 increase next year. Is that something indicative that we should be thinking about that from a -- on a go-forward basis with respect to your dividend, maybe you do small incremental increase in the dividend and just kind of as a program, or how are you guys thinking about the dividends?

Well, I mean, as we said in October when we announced this, this is that our aim is to reward the shareholders. We happen to be the largest shareholder ourselves, so it's nice rewarding now all of us equally when the market is right.

The $0.01 increase for next quarter is an indication that there for sure there is upside rather than downside. So, if the market continues to be where it is today or even close to where it is today, I believe that the Board will take the decision to normalize the increase.

But, that will be a very good time -- our next Board meeting will be in March, and that's when the next dividend will be announced.

Okay. And then, my last question quickly -- or briefly, I guess, is maybe for Paul. You guys, with respect to interest expense, have had some of the swaps roll off. So, is the interest rate -- the indicative interest rate that we can see here, is that a pretty good run rate for how we should be modeling interest on a go-forward basis?

Yes, I think that's a fairly good standard to use. We're talking about, as far as the loans are concerned, an all-in interest rate, including swaps, of just under 3%. So, yes, that's a good standard.

Okay. All right, very good. Thanks a lot. I appreciate it, guys.

Thank you.

Canaccord, Noah Parquette.

Thanks a lot. A lot of my questions have been answered already, but I just wanted to get your updated thoughts on the VLCC segment. That's a sector that you're not really as involved in as some of the other segments. Obviously there's a lot on your plate now, so just wanted to see what -- your updated view on the outlook on that and putting capital into that to work in there.

Yes, thank you. Well, you are very correct. We want to be diversified. We have sold, I think at the right time, our owned ships. And we are looking to expand in this segment.

We are in discussions with our first class yards and with first class charters. I think our priority is the more specialized side of the business, like the shuttle tankers. But, on the crude side, I think we are quite well diversified, and in all the other segments.

As you perhaps remember, we announced an additional two Panamax vessels, which is a category that very few participants are there. And if you look at the Panamax order book, I think it's one of the lowest in the segment. Thank God that private equity has not identified this target yet, and I hope they will not.

And so, we just ordered two Panamaxes with long contracts to Shell with significant minimums and profit shares, which is our typical strategy. But, I think other than that the VLCCs -- we have right now two major oil companies offering us 15 year business for VLCCs, which we will be concentrating there. We want to first finalize our shuttle investments and then look into it.

Okay. And then moving on to the lower oil price environment, obviously it's been a boon. On the supply side, and you touched on this, with rates where they are and bunker prices coming down, are you seeing any pressure to speed up, or are we anywhere near the levels where ships would start to speed up, just if you can give more color there?

Again, we are -- it is only natural that with the lower cost of bunkers and substantially higher -- and I am saying this looking at -- our technical manager is here, so naturally he doesn't do this -- you get the information to start speeding up.

Our policy is to maintain -- one of the reasons the market is where the market is today is because prudent owners have kept their ground and they kept their ships speeding anywhere between 8 and 11 knots. And I think it would be -- long term, it would have a very positive effect for the market if we could continue doing so. But, of course we cannot impose anything other than to our own company.

Okay, that's very helpful. Thanks a lot.

Morgan Stanley, Fotis Giannakoulis.

Yes. Hi, guys. My questions have been answered. The only thing that I want to ask is about the LNG vessel, if you had any progress about your discussions in finding a renewed charter that -- in order to accelerate the timing of the MLP listing.

Fotis, hello. Yes, thank you. And we are right now in discussions for a block deal for both our LNG vessels, the existing vessel which is in the water and the Maria.

So, we hope that before the end of January we will be able to finalize official business so we'll be, as we said, MLP suitable. However, we would also need the MLP market to start being a bit more suitable, because from what we see recently the recent MLPs have been priced far away from what I think TEN would like to be paying for an MLP.

But, you are correct. We will have hopefully news soon.

Okay. Thank you very much for your answer.

Thank you.

Euro Pacific Capital, Mark Suarez.

Good morning, gentlemen, and thanks for taking my question. Maybe it's a question for Niko. We can start with where we stand today with oil prices and obviously we are seeing improved short term demand, and as I'm seeing your charter profile, should we expect maybe those pieces renewing in 2015 with more attractive profit share components as you start to leverage your position in the market today? How do you see that developing over the next 12 to 18 months?

Yes, and this is a very valuable point. Of course when the market is moving, what we do is we will -- you will see us renewing with higher minimums. And I think that's the only affect that you can do, if you continue with that policy, is to look at the higher minimums.

So, whereas perhaps you would accept a Suezmax at $20,000 in the past, today we will be looking to charter it at $26,000, $27,000 in a profit share. So, of course that's a significant upside on the minimum.

So, as you go to your counterparties, do you feel you have more leverage then, given where we stand in terms of short term demand in the crude space? Would that be a fair assessment?

Yes, that's correct. It is a owners' market as we speak today.

Okay, good. And then, maybe going back to your fleet here and any potential sales, I think you mentioned in your press release there could be opportunities for any potential asset sales. That may prove fairly productive. And could we see a situation where you can maybe possibly reinvest that capital into new or secondhand acquisitions, possibly charter attached? And with that, will you see deploying that capital in the crude space, or will you maybe look at all possibilities here?

Well, I mean, right now the ships that we have candidates are the -- we have a very young fleet, but our ships that are, let's say, 12 years old, like our older Suezmaxes, right now they're earning an amazing amount of revenue for us.

But, sometimes the time to sell is the time that everybody wants them so they can have this revenue. So, yes, we have not changed that policy. We are, of course, at different times sellers of our older tonnage. This will give us significant capital gains, a lot of cash to reinvest in newer ships going forward.

Okay. And then, just moving on to the income statement for a second, on your daily operating expenses I know that lubricant costs have actually gone down and are tracking down in the fourth quarter. How should we think about daily operating expense inflation as we head into 2015?

Well, I think Paul will answer this.

Yes, I think as far as operating costs are concerned, there's a lot of good news and then just a little bit of bad, which I'll talk about.

I think the first and most important thing as far as charters is concerned is that we have a new team running our technical managers. They're young, experienced, and dynamic guys who are really making an effort to keep our supply costs down.

And most important, I think, and this is quite important, the operational improvements have increased a lot. So, our insurance record has gone from good to excellent with our premiums set to fall in the next round of negotiations.

Apart from that, of course, we have the dollar strengthening very significantly over the past few months. And as a good 25% of our operating expenses are in euros, the stronger dollar of course is helping keeping costs down in that respect as well. So, I think that's the good news.

And some irritating news is the fact here in Greece we have to suffer a little bit of extra crude taxes and tonnage taxes. But, it's very manageable and that didn't really hurt.

Got you.

So, (multiple speakers) I think we're -- it's going well as far as operating costs keeping stable are concerned.

Okay, great. That's helpful. So, Paul, do you think we could see those benefits in the fourth quarter, or is that more of a 2015 event?

You'll certainly -- we're already seeing them as far as the dollar is concerned, keeping the costs down, and certainly as far as lubricants are concerned. So, yes, you will see those in quarter four.

Okay, great. And then, one last one for me. I know you've increased your dividend. And where we see the stock price today, do you think -- or you think there is a point where maybe the Board will consider using your share buybacks as an alternative to maybe yields on return to investors?

Yes, I think -- okay, share buyback is not a dirty word for our Board, but I think they would rather reward the existing shareholders with dividends.

So, this is -- I would say our first obligation is attractive growth or reward with dividends our shareholders. And then, if there is none of those two around, then the buyback is an alternative.

Okay, great. That's helpful. Thanks for your time again.

Thank you.

And as there are no further questions at this stage, I will pass the floor back to you for closing remarks.

Well, again thank you very much for the interest of the company. We are approaching the end of the year with a very positive note. We are looking in a very strong 2015.

Demand is there. Supply is not there finally. And we hope that we are going to be navigating through much more profitable and calmer waters.

What we want to achieve is to get our share price where it was. I think it's ridiculously cheap right now, and I think having gone out of the woods it should only go up from here.

Right now the company is very well placed to take advantage of a strong market, but we have also maintained a very good balance for weaker markets. So, we're expecting things to be better. We are all much more optimistic than we were a year ago.

So, thank you very much. Have a very good Thanksgiving. And we will have our troops on the ground from December the 1st for the Capital Link event. And our CFO, Paul Durham, and our marathon runner, Harrys Kosmatos -- he doesn't have a title, he runs the marathon -- is going to be in New York for the Capital Link event and then for -- to see a quarter of you would like to have meetings with them. Keep them busy. Thank you very much.

Thank you very much indeed sir. And with many thanks to all our speakers today, that does conclude the conference. Thank you for participating. You may now disconnect.